Brazil’s digital real debuts on a public blockchain
One of the Brazilian central bank’s initial attempts at a digital reality has achieved relative success after being demonstrated on a public blockchain.
Local publication Valor Economico says the experiment was conducted by digital currency exchange Mercado Bitcoin and the Stellar protocol designed to promote low-cost and real-time settlements for users. The pilot placed particular emphasis on the simulated delivery versus payment (DvP) transactions for the simultaneous exchange of funds and assets.
“Our task was to prove that it is possible, viable and safe to transact digital assets using a representation of reality on public networks,” said Fulvio Xavier, Head of Special Projects at Mercado Bitcoin. “The central bank is always keen to understand what happens when transactions leave its hands.”
The latest study revealed that it was possible to merge a tokenized version of the Brazilian payment system with decentralized finance (DeFi), where Stellar went further to stratify access to certain features. Brazil’s central bank has considered using a permissioned private blockchain for its central bank digital currency (CBDC), but the recent study shows that a public blockchain could still offer security, privacy and a host of other benefits.
“Stellar becomes almost a ‘proxy’ for the regulator to test the current digital real checks on an open platform, said Roberto Durscki, Head of Partnerships at Stellar. “In practice, it allows piloting a relatively complex and successful use case with access to DeFi- applications.”
The results of the study will ultimately help the Brazilian central bank in its quest to launch a digital real to complement physical currencies. An important part of the study was the ease of onboarding people with no experience with Web3 platforms or digital wallets, and its compliance with existing regulations.
The CBDC launch is just a few months away
Plans for a full-scale CBDC launch are slowly gaining momentum, with the central bank targeting 2024 as a tentative date. Central bank governor Roberto Campos Neto confirmed the plans in late 2021, saying it will improve financial inclusion.
“Greater inclusion, lower costs, intermediation, competition with reduced barriers to entry, efficiency in risk control, monetization of data, complete tokenization of financial assets and contracts,” Neto revealed at a conference hosted by Poder360 news outlet.
Several financial institutions and technology firms have indicated interest in working with the banking regulator to conduct CBDC experiments. Visa, Aave, Banco Santander Brazil, ConsenSys and Microsoft (NASDAQ: MSFT) were selected to explore various capabilities for the digital reality, including SME financing, rural financing and DvP for digital currencies.
To learn more about the central bank’s digital currencies and some of the design decisions to consider when creating and launching it, read on nChain’s CBDC Playbook.
See: CBDCs and BSV
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